NEWS & TRENDS

HOMEGROWN MARKET
Recent research from PEPCO Technologies sheds some light on how utilities can help build and meet residential customers' demand for backup power supplies and services.

The company markets GenerLink, a collar-like interconnection device installed behind a homeowner's meter that allows him or her to use the house's circuit panel to control which appliances can be used when the house is on backup power. In a survey of current GenerLink users, PEPCO Technologies discovered several facts about the residential market for backup power that indicate that utilities are especially well positioned to serve it:

• residential customers want one-stop shopping;
• because of their favorable impressions of local utilities, frequently homeowners prefer to work with them rather than a contractor when selecting and hooking up a portable generator;
• homeowners place a significant value on the ability to manage the loads they place on their portable generators from their household circuit panel; and
• forty percent of the customers purchased a generator after GenerLink was installed, suggesting that when the local utility markets the device, it helps build demand for portable generators.

Although the U.S. power system is reliable over 99 percent of the time, more and more homeowners are buying portable generators and looking for a safe and easy way to hook them up according to PEPCO Technologies' president Brad Johnson. The Washington, DC-based firm sells GenerLink to utilities, which in turn lease them to customers for about $10 per month. Utilities like the device not only for its obvious revenue potential and ability to increase customer satisfaction and loyalty, Johnson says, but also for its safety features: It automatically disconnects the home from the utility's grid when the portable generator is operating, which prevents the onsite power from feeding back into the grid and endangering line crews who might be working to restore power.

NONHAZARDOUS DECISION
Last April, just hours after a federal court denied the Environmental Protection Agency (EPA) a four-month extension in making its required regulatory finding regarding the treatment of coal combustion products (CCPs), EPA determined that CCPs do not warrant regulation as hazardous wastes. The determination affirmed the findings of the agency's 1999 report to Congress on fossil fuel combustion wastes, which concluded that these materials are not hazardous.

In the weeks leading to its decision, however, EPA had signaled its intentions to ignore its previous research and declare CCPs hazardous and subject to federal regulation. Such a decision would have resulted in billions of dollars of compliance costs for the electric industry.

In 1993, EPA had determined that high-volume fossil fuel combustion wastes—fly ash, bottom ash, flue gas desulfurization materials, and boiler slag—need not be regulated as "hazardous" under the 1976 Resource Conservation and Recovery Act due to the "limited risks posed by them and the existence of generally adequate state and federal regulatory programs."

April 26 was EPA's deadline to determine whether to regulate remaining wastes, such as boiler washes, boiler cleaning wastes, and any high-volume wastes mixed with them. Edison Electric Institute (EEI) had noted that a decision to regulate such wastes as hazardous would likely call into question the 1993 determination.

EPA's announcement indicated that the agency plans to develop voluntary national standards to address the wastes and that it will continue to evaluate new information, leaving the door open to future action. The agency noted that "if the states and industry do not take steps to address these wastes adequately in a reasonable amount of time, or if EPA identifies additional risks to public health, EPA will revisit this decision to determine whether a hazardous waste approach is needed."

Paul Bailey, EEI vice president, environmental affairs, characterized the agency's determination as "a sound decision supported by the scientific record." He said that the electric utility industry was especially pleased by EPA's acknowledgment of the many beneficial uses of CCPs. More than 30 million of the 107 million tons of CCPs produced annually are used in cement and concrete production, mining applications, snow and ice control, agricultural processes, and other useful ways.

By using coal combustion products, electric utilities reduce the volume of waste sent to landfills and energy consumption. Bailey noted that EPA's action will encourage development of additional uses for these materials and said that the electric industry remains committed to working with the states and EPA to ensure that these materials continue to be managed "in a manner protective of human health and the environment."

WHERE HAS THE INVESTMENT GONE?
In April, the U.S. House of Representatives passed HR 3615, the Rural Local Broadcast Signal Act. The bill seeks, among other things, to enable the Rural Utilities Service (RUS) administrator to provide loan guarantees to improve rural Americans' access to the signals of local television stations. During a hearing held by the subcommittee on Telecommunications Trade & Consumer Protection in March, Roger C. Viadero, inspector general of the Department of Agriculture, offered his analysis of what some previous RUS borrowers—like rural electric cooperatives—have done with the money they borrowed.

"We audited RUS electric program borrowers to determine the extent of their investment activities and the degree to which the borrowers invested in rural America. We discovered that RUS borrowers have not become major players in financing America's rural infrastructure, despite the fact that these borrowers hold almost $11 billion in total investments. Disappointingly, only one-half of 1 percent of the amount—about $61 million—is actually invested in rural America.

"The Northern Virginia Electric Cooperative (NOVEC) provides a good example. NOVEC has borrowed about $129 million from RUS and holds $128 million in investments, none of which is classified as rural development. Among the electric coop's investments is a subsidiary called NOVASTAR—a company that is partnering with dish Network and DIRECTTV to sell premium satellite TV services to the Northern Virginia and metropolitan Washington, DC, areas. I want to emphasize that NOVEC is not violating any laws by investing in satellite TV for a metropolitan area. However, I believe that encouraging RUS borrowers to invest more heavily in rural America makes good sense. The same dollar that provides satellite TV to the area right here on Capitol Hill could be used to bring much needed services to underserved communities in rural areas.

"Unfortunately, RUS electric program borrowers, on their own, have not invested heavily in rural America. Instead, investment dollars are used for such things as money market certificates, stocks and bonds, and mutual funds. We recommended that RUS develop and implement a strategy to encourage electric borrowers to use some of their $11 billion portfolio to make discretionary investments in rural America. RUS has agreed to develop and implement policies and procedures to strongly encourage borrowers to meet the intent of Congress. This new strategy could promote investment practices to ensure the delivery of local television programming to subscribers of satellite television in rural markets. Through increasing investments for rural access to telephones, computers, and the internet, RUS borrowers could help close the digital divide.

"In another recent audit, we identified 434 RUS telephone program borrowers with loan balances totaling $1.9 billion that appear to be in good enough financial condition to satisfy their credit needs from their own financial organizations or from other credit sources. Our findings echo and expand on conclusions reported by the General Accounting Office (GAO) in a January 1998 report that detailed options to make the RUS telephone loan program more effective and less costly. GAO reported that some borrowers may retain loans longer than needed and are therefore able to take advantage of the favorable terms provided by the government. RUS continues to incur interest and other administrative costs in servicing the accounts of its financially healthy borrowers.

"The law requires RUS to encourage and assist rural telephone systems to achieve the financial strength needed to enable them to satisfy their credit needs from their own financial resources or from other sources. Our trend analysis of key financial ratios showed steady improvement in the telephone loan portfolio and that half of RUS telephone borrowers are in strong financial condition. However, RUS does not have discretion to refuse a loan because a borrower is in strong financial condition, and the Rural Electrification Act is silent regarding loan graduation—that is, requiring borrowers to move to private credit when they are financially able.

"We recommended that RUS work with Congress to clarify policy regarding loan graduation and requiring financially strong borrowers to obtain credit from commercial sources. RUS disagrees with our recommendation.

"RUS should seek clarification about loans to borrowers who do not need Government assistance…. The money freed up could, perhaps, be better used in other ways. For example, preserving and enhancing access to local and network television signals is important to rural America's economy. As enunciated in HR 3615, local television, with its mix of crop reports, local news, weather reports, public service announcements, and advertisements for local business, is vitally important for rural development efforts.

"According to the National Telecommunications and Information Administration, Americans living in rural areas are lagging behind that national average in computer and internet access, regardless of income level. At some income levels, those in urban areas are 50 percent more likely to have internet access than those earning the same income in rural areas. The $1.9 billion currently loaned to telephone program borrowers who do not need federal assistance could go far in closing the digital divide."

POWER MARKETER REPORT CARD
Power marketers endured a topsy-turvy year because of unseasonable temperatures and a tightening of the marketplace through a combination of consolidation and outright exit from the industry.

Of the top 20 power marketers, six had decreased sales—including number one Enron Power Marketing—even though half had double digit volume increases.

Among those making the greatest surges in Hart's Energy Markets ranking of the top 20 power marketers were

• Reliant Energy Services, with 112 million megawatt-hours (MWH) in sales, rising from twelfth to seventh;
• Avista Energy, which rose from thirteenth to sixth with 135 MWH; and
• PG&E Energy Trading, whose 222 million MWH helped it leap from eighth to fourth.

On the other side of the equation, Enron maintained its number-one spot with 392 million MWH, despite a 2.1 percent drop from its 1998 postings. Dynegy had the greatest drop, dipping from fourth to thirteenth.

Rounding out the top 10 were

• AEP at number two with 306 million MWH;
• Aquila Power Corporation at number three with 236 million MWH;
• Southern Company Energy placed fifth with 219 million MWH;
• Duke Energy Trading was eighth at 109 million MWH;
• Entergy was ninth at 106 million MWH; and
• Citizens Power Sales, with 92.3 million MWH, ranked tenth.

FUEL CELL FIRST
Edison International and Siemens Westinghouse Power Corporation recently completed factory testing for the world's first fuel cell/gas turbine hybrid power system. The 220 kilowatt proof-of-concept system combines two cutting-edge technologies—a pressurized solid oxide fuel cell (PSOFC, manufactured by Siemens Westinghouse) and a high-speed microturbine generator, manufactured by Ingersoll-Rand Energy Systems. Southern California Edison holds a key patent and extensive worldwide marketing rights for pressurized fuel cell/microturbine technology.

During factory testing at Siemens Westinghouse's Pittsburgh facility, the system produced 164 kilowatts (KW) of direct-current electric power from the PSFOC module, plus an additional 21 KW of alternating current from the microturbine. The unit could produce enough electricity to power more than 200 homes or a strip mall.

The hybrid system has been installed at the National Fuel Cell Research Center at the University of California, Irvine, for further testing and to gather data to design commercial prototypes. Funding partners for the $16-million demonstration project include Edison International, the U.S. Department of Energy, and the California Energy Commission.

Under an innovative mechanism approved by the California Public Utilities Commission, Edison International shareholders are helping fund ongoing hybrid development and will receive 98.5 percent of gross revenues when the product is commercialized.

THE SMALLEST
Fine particulate matter (PM2.5, less than 2.5 microns in diameter, or 30 times smaller than the diameter of a human hair) includes soot, dust, aerosols, metals, and sulfates, which are primarily emitted by vehicles and industrial sources. The Environmental Protection Agency (EPA) has determined that it contributes to smog.

In the first of two "SuperSite" studies initiated by the agency, about 60 scientists from the Georgia Institute of Technology and other institutions converged last summer at an Atlanta air quality research facility owned by Georgia Power. They measured PM2.5 around the clock for a month.

"We are trying to determine how to measure the concentration and composition of fine particulate matter in the atmosphere and the types of instruments best suited to do that," said William Chameides, a professor in the Georgia Tech School of Earth and Atmospheric Sciences and head of the SuperSite study. "We need to do this to understand the health effects and the sources, and to monitor compliance with EPA standards."

Specifically, the research team expects to

• evaluate emerging and/or state-of-the-science PM measurements;
• compare and contrast similar and dissimilar PM measurements;
• evaluate the precision, accuracy, and completeness of information that can be gained from the planned EPA network of Super Sites;
• evaluate the scientific information gained by combining various independent and complementary PM measurements; and
• address various scientific issues and their ozone- and PM-related policy implications with the database they are developing.

Chameides hopes to discover whether the production of ground-level ozone and PM2.5 are chemically related. Both are secondary pollutants, meaning they are not directly emitted into the atmosphere but are instead generated in the atmosphere by chemical reactions.

"It's possible that controlling one pollutant without controlling the other might make one worse," Chameides said. "The trick is to fully understand how they interact so you can come up with a strategy to deal with both of them."

Chameides is spearheading the SuperSite study under the auspices of the ongoing Southern Oxidants Study (SOS), which involves about 20 universities and agencies. EPA is providing the primary funding for the Atlanta SuperSite study. Other funds are coming from the U.S. Department of Energy, Tennessee Valley Authority, and the National Oceanic and Atmospheric Administration.

Georgia Power and its parent, Southern Company, are providing the research facility and some equipment. The facility was already in use for other SOS-affiliated studies funded in part by utility companies and other industry partners. They include research by the Southeastern Aerosol Research Characterization/Aerosol Research Inhalation Epidemiology Study and the Southern Center for the Integrated Study of Secondary Aerosols.

Researchers expect to present results of the SuperSite study at the annual meeting of the American Geophysical Union in December 2000. A final report to EPA will follow in February 2001.

DISTRIBUTION IN THE FINAL FRONTIER
The idea of beaming solar power from space was first proposed more than 30 years ago, but now, according to EPRI, the perceived need for such a source is greater and the outlook for eventual economic feasibility within the next several decades is more favorable.

According to an article in the April issue of the EPRI Journal, sun-facing photovoltaic arrays in stationary Earth orbit at an altitude of 22,300 miles would receive eight times as much sunlight as they would at the earth's surface, on average. Space arrays would also be unaffected by the Earth's day-night cycle, cloud cover, and atmospheric dust. Transmitters connected to large space-based solar photovoltaic arrays could then beam as much as several billion watts of power to Earth at microwave radio frequencies for collection by a wide-area rectifying ground antenna and conversion to electricity.

John Mankins, the manager for advanced concept studies at the National Aeronautics and Space Administration, notes that key developments in recent years in such areas as information technologies, robotics, power generation, and electronics all promise to reduce the costs of space solar power (SSP). The physics are well known, and the fundamental technology for such a scheme is largely in hand, although substantial development would be necessary to realize a space power system.

Other scientists have envisioned that building solar collectors on the moon will ultimately provide an elegant alternative to launching satellite components into orbit. It would also solve the problem of debris from satellites that could threaten both commercial satellites and space flights from earth. The lunar soil could supply silicon to build solar arrays and metals (such as iron and aluminum) for support structures and electric wiring.

Moreover, the moon's environment is extremely dry, and there is no weather—all the things that make solar energy difficult on earth are absent on the moon.

According to David Criswell, director of the Institute for Space Systems Operations at the University of Houston, lunar solar power could supply a 2050 world population of 10 billion people with enough energy to meet all basic human needs at low cost and with few, if any, environmental downsides.

Government funding for an SSP exploratory research and technology program was authorized for fiscal year 1999 and is continuing in the current fiscal year. According to the EPRI Journal article, even the most ardent believers in the potential for SSP stop short of suggesting that an urgent, capital-intensive development effort be an objective for the near term. Many technical, economic, environmental, legal, and regulatory issues will need to be resolved internationally. Meanwhile, supporters say that the notable progress made thus far makes the case for pursuing the program at its current pace.

THE WEC PRESCRIPTION
In its recent "Statement 2000," the World Energy Council (WEC) identified three energy goals, which it termed fundamental to political stability worldwide, energy business strategy in the 21st century, and achieving a sustainable future:

• accessibility—the provision of reliable and affordable modern energy services for which a payment is made;
• availability—covering both quality and reliability of delivered energy; and
• acceptability—addressing environmental goals and public attitudes.

To achieve those goals, WEC outlined 10 policy actions, covering what it believes to be the most important policy issues in sustainable energy development between now and 2020.

Reap the benefits of market reform and appropriate regulation. As a general rule, governments need to withdraw from directly managing energy markets and should restrict their role to setting sound rules administered by impartial regulators. The key words are liberalization, trade, privatization, and, more generally, customer choice.

Keep all energy options open. Energy systems are characterized by inertia, and their adaptation to new price realities is either slow or costly. There must be room for the development of new energy forms that would compensate for the finite nature of some types of existing energy supplies or would use technologies in new ways to reduce harmful side-effects. Energy diversification, regional integration of energy systems, and enhanced trade in energy services are relevant strategies.

Reduce the political risk of key energy project investments. Past experience with arbitrary currency devaluation, changes in fiscal regimes, and barriers to benefits repatriation, among other developments, creates a political risk that increases the cost of capital investment, especially in developing countries. Noncommercial risk insurance available on a bilateral basis at a maximum level is insufficient for most energy-related investments.

Price energy to cover costs and ensure payment. Energy of any sort is not a social, free public good. Its price must reflect all variable, maintenance, and extension costs, and there must be a reliable system for customers who use the energy to pay for it.

Promote greater energy efficiency. Energy intensity is directly related to price signals while energy efficiency depends more on the diffusion of the most cost-effective technologies. The introduction of minimum legal standards in energy equipment and service is critical. The presence of metering and a payment system is essential to decoupling energy consumption from gross domestic product growth.

Foster financing partnerships linked to environmental goals. Domestic actions to reduce greenhouse gas (GHG) emissions, especially in industrialized countries, merit attention in their own right. Indeed, in the context of climate change mitigation, industrialized countries are encouraged to take domestic action first and foremost. However, given the enormous need for new capital stock in developing countries, international mechanisms that stimulate capital flows linked to clean and safe energy projects in those countries are valuable supplementary approaches that should be a high priority of governments. The largest low-cost potential for abating energy-related GHG emissions lies in developing countries.

Ensure affordable energy for the poor. Economic and social policies aimed at equitable income distribution are the most effective means of helping the poor. Past experience shows that such policies contribute to the economic growth of the country as a whole.

Fund research, development, and deployment. This action addresses a "common good," or shared benefits for all, and calls for adequate government funding. Such spending will be more efficient if done under competitive conditions. At the international level, cooperation among governments to minimize overlap while maximizing competition should be promoted. At the national level, impartial authorities including academics, industry, and the public should oversee budget sharing and spending.

Advance education and public information. Education and public information need an open, transparent, independent, lively, and provocative debate. There is a need to fund effective energy institutions at national or international levels (in both developed and developing countries).

Make ethics a strong component of energy system governance. In a globalized society, companies operating internationally should act as world citizens. They should not only respect national laws and regulations but also move the global energy and environment agenda forward. Fundamental business ethics, including honesty and the avoidance of corrupt practices, are essential, but the need for ethics goes beyond these. Voluntary energy and/or environment audits, their widespread publication in civil society, common standards for safety and performance, best industrial practices, and respect of energy workers should be fostered in all plants in all countries in which a company operates.

Consumers Energy, one of the first utilities to develop formal environmental and wildlife habitat plans, was recognized for planting millions of trees and providing public recreation opportunities. Over the past 30 years, the company has transferred nearly 100,000 acres of land to state and federal ownership for public use.

© 2008 Edison Electric Institute